SK and Sprint: considering alliance, not merger

Yesterday's CNBC story about potential merger between SK Telecom and Sprint is being debunked today.  Instead, the Wall Street Journal and a few other news outlets are reporting that SK Telecom and Sprint are considering a partnership in which they would jointly develop handsets and services.  Last November, Sprint rejected a $5 billion investment offer by SK Telecom and Providence Equity Partners and WSJ sources say that any investment that results from the current talks would be much smaller.

In a blog posting yesterday about the rumored deal, Pali Research analyst Walter Piecyk said that since that first offer last November Sprint's fundamentals have eroded. He also speculated that SK might be considering an equity investment in Sprint and not a merger.

Recently Sprint has shown some signs of a rebound. The company's new Samsung Instinct phone is selling well and the company is expected to have improved its churn when it reports its second-quarter earnings on Aug. 6.

In late June, SK Telecom invested $25 million in equity capital in Virgin Mobile USA as part of Virgin's acquisition of MVNO Helio. SK will have a 17 percent investment in Virgin Mobile and two seats on the Virgin Mobile board of directors. The deal is supposed to close in the third quarter.

For more:
- see this WSJ report (sub. req.)

Related stories:
SK Telecom contemplating Sprint acquisition
Virgin buys Helio for $39 million